IMPORTANT POINT
If the arbitrator has taken one of the possible view of the matter, the court should not interfere with the award.
Perverse finding is one which is not only against the weight of evidence but altogether against the evidence.

JUDGMENT

Gokhale, J. —

This appeal is directed against the judgment and order dated 19th December 2001 rendered by a Division Bench of the Bombay High Court in Appeal No. 126 of 2000 confirming the decision of a single Judge of that Court dated 29th November, 1999, in Arbitration Petition No. 104 of 1998 whereby the High Court has set aside the Award dated 27th June, 1995 made by the umpire in an Arbitration claim of the appellant against the respondent. The question involved in this appeal is as to whether as held by the Division Bench, the umpire had failed to apply his mind to the material on record and the clauses of the contract between the parties thereby rendering a perverse award, or whether his decision was a possible one and the High Court had erred in interfering therein.

2. The appellant had entered into a contract with the first respondent for installing and commissioning of Well-cum-Production Platform Deck and connected system including submarine pipelines on a turn-key basis at its Bombay High (South) Offshore Site for extraction of oil. The appellant had appointed M/s.Mc Dermott International Inc (in short ‘MII’) as the Sub-Contractor in execution of this work by a back to back contract to the full knowledge of the respondent. The appellant had sought from the respondent the reimbursement of the Income-tax amount which MII was required to pay to the Union of India under newly added Clause 44BB of the Income Tax Act 1961 (concerning the profits and gains in connection with the business of exploration of minerals) and which amount was paid by the appellant to MII. The respondent had declined to reimburse the tax amount.

3. The appellant, therefore, invoked the Arbitration clause in the agreement between the appellant and the respondent. The appellant contended that their liability had arisen due to change of law and that under clause 17.3 of the General Conditions of Contract forming part of the contract between the parties, the respondent was required to reimburse this amount since it was in the nature of necessary and reasonable extra cost arising out of change of law. (In the General Conditions of contract its clauses are referred to as sections.) As against this, the submission of the respondent was that they were responsible only for the appellant’s tax liability under clause 23 of the General Conditions, and if at all, it was the responsibility of the appellant under clause 13.2.7 thereof to take care of the obligations of the Sub-Contractor.

4. The two arbitrators appointed by the appellant and the respondent differed while deciding this claim of the appellant for reimbursement. This led to Sir Micheal Kerr entering the reference as the Umpire who has accepted appellant’s claim, by award dated 27.6.1995. By the said award, the umpire directed the respondent to pay the appellant the sum of Japanese Yen 129,764,463/- with interest at 4.5% per annum from 15.5.1991 to date of award. He declared that in the event of appellant becoming liable to pay further sums to MII thereafter, due to any assessment of income tax on MII under the present sub-contract pursuant to Section 44 BB of Income Tax Act, then Respondent shall indemnify the appellant against any such payment on demand. He awarded costs also. The respondent sought setting aside of the award of the umpire by invoking the jurisdiction of a learned single Judge of Bombay High Court under Clause - 30 of the Arbitration Act, 1940. The learned single Judge took the view that the said reimbursement by appellant to MII was a voluntary act on the part of the appellant and the terms of the contract did not require the respondent to reimburse the said income-tax amount to the appellant. The learned single Judge held that the construction placed by the umpire on clause 17.3 of the agreement was ‘clearly an impossible one’, and therefore, the Court would be justified in interfering with the findings and the award. The learned single Judge, therefore, allowed the Ar